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Who’s On Track for Retirement and Who’s Not

A surprising Transamerica study sizes up Gen Y, Gen X and boomers


Although many Gen X’ers (age 35 to 50) and boomers in their 50s and 60s working full-time are retirement-savings challenged, the same can’t be said for Millennials (mostly in their 20s) as a whole.

In fact, the Gen Y crowd is putting the rest of us to shame, according to the new 16th annual Transamerica Center for Retirement Studies (TCRS) survey, Retirement Throughout the Ages: Expectations and Preparations of American Workers. (Transamerica surveyed 4,500 full-time and part-time workers in February and March 2015.)

(MORE: Workers Need a Retirement Reality Check)

Those Impressive Twentysomethings

Although TCRS President Catherine Collinson told me that no age range “is perfect” about saving and planning for retirement, she said “workers in their 20s are off to a phenomenal start.” Collinson added: “More of them are saving for retirement and at a younger age than previous generations.”

According to her survey, 67 percent of workers in their 20s are saving for retirement and they started doing so at a median age of 22. (Were you saving for retirement at 22?)

But hold your applause: 24 percent of these supersavers are ultraconservative investors, putting most of their retirement money in low-risk, low-return holdings: bonds, money market funds, cash and other stable investments. Their total household retirement savings: $16,000 (median).

“They’re afraid of the stock market,” says Collinson. “They came of age in the Great Recession and witnessed extreme market volatility. They also saw what happened to their parents’ retirement funds during that time.”

(MORE: Boomers’ Kids Are All Right as Retirement Savers)

Most financial wags would view the twentysomethings’ conservative investing approach as a mistake. With decades to go before retirement, these young people can afford to put their discretionary cash primarily in stocks, if not a balance of stocks and bonds, after building up an emergency savings fund.

“They need to get savvy about investing,” says Collinson, who calls this age group “committed, cautious and concerned” when it comes to retirement planning.

If you’re the mother or father of a working twentysomething, I’d encourage you to have the second “Talk” — this one about investing basics. Or encourage your kid to read a good book on the subject, like Investing for Dummies (the Kindle edition costs just $13.81) or visit an investing site with advice for beginners, like Wisebread.com, The Motley Fool or Investor.org from the federal securities regulator, the Securities and Exchange Commission.

Here’s a look at how well the other age groups are doing preparing for retirement, according to Transamerica:

Thirtysomethings: ‘Strong Savers, Weak Planners’

This group — the younger Gen X’ers and older Millennials — is also pretty serious about retirement saving.

More than three-quarters (76 percent) of them are putting money away, according to Transamerica and they started at a median age of 25. I was frankly floored to find that 30 percent of these savers are contributing more than 10 percent of their annual pay to a retirement plan. The total household retirement savings for workers in their 30s: $45,000 (median).

But thirtysomethings, who view themselves as DIY’ers about investing, could do a better job of retirement planning. In Transamerica’s survey, 57 percent said they “guessed” their retirement savings needs and 68 percent conceded they didn’t know as much as they should about retirement investing.

Advises Collinson: “I’d say they should keep up the good work and save more if they can, but now is the time to build their knowledge of investing and long-term planning.”

If their employers offer free financial planning services — online tools, brochures or workshops — they should take advantage of them.

Fortysomethings: ‘Financially Frazzled, But Focused’

These sandwiched Gen X’ers have a combination of terrific retirement savings habits and worrisome ones.

Like the thirtysomethings, 76 percent of them are saving for retirement, according to Transamerica. But they didn’t get started until age 30 (median), though that’s partly because some weren’t offered retirement plans at work initially. Back then, “401(k)s weren’t the widespread phenomenon they are today,” notes Collinson.

(MORE: Retirement Mistakes of Gen X)

And those who have 401(k) or similar plans are only putting in a median of 7 percent of pay; just 23 percent are investing more than 10 percent — many are also trying to save for college, though, which helps explain this. In addition, many cite paying off credit card or consumer debt as their greatest financial priority.

The median total household retirement savings of fortysomethings: $63,000. That less-than-stunning figure may help explain why 61 percent of this age group say they expect to work past age 65 or don’t ever plan to retire.

Most concerning: 24 percent have either taken a loan or an early withdrawal from their retirement plans.

401(k) loans are a wolf in sheep’s clothing,” says Collinson. “I think 401(k) loans should be avoided at all costs.” Here’s why: You’ll miss out on earnings growth from the money you borrow, the loans typically must be repaid within five years and if you leave your employer, you’ll often owe taxes on the loan money plus, if you’re younger than 59 ½, a 10 percent tax penalty.

401(k) hardship withdrawals are less onerous, but they shrink the size of the money you’ve dedicated toward retirement. “Dipping into your savings plan should be your last possible resort,” cautions Collinson.

Fiftysomethings: Facing Future Retirement Realities

The youngest boomers and oldest Gen X’ers are “off track” for retirement, says Collinson. “And they’re now at an age where they need to face their future retirement realities. They still have time to correct.”

While 80 percent are saving for retirement, they didn’t get started until age 31 (median). There’s a sizable chunk — 31 percent of those offered 401(k) or similar plans — who are stashing more than 10 percent of their income in the plans. But many are saving far less, if at all; the median household retirement savings for people in their 50s is $117,000.

The majority of fiftysomethings (59 percent) plan to work past age 65 or don’t plan to retire.

Collinson’s advice: “You need to do your homework, stay healthy and keep your work skills up to date.” If you’re not in good health or your skills are stale, you may not be able to keep working past 65, even if you want to do so.

Sixtysomethings: Transforming Retirement As They Retire

It’s hard to generalize about the older boomers, since some are still working full time and some are retired — either not working at all or working part-time. Transamerica only surveyed ones who were working and lumped them with workers who were past their 60s.

Among this group, which Collinson says is “transforming retirement as they retire,” 82 percent either expect to work past age 65, already are or don’t plan to ever retire. More than half of them (56 percent) are doing so because they can’t afford to retire or for “income or health benefits.”

Their total median household retirement savings: $172,000; 39 percent say they’ve saved $250,000 or more.

“There’s a number of things they could be doing,” says Collinson. “One of the most important is to prepare for a Plan B, if they’re forced into retirement sooner than they expected.”

That means: Bone up on your Social Security benefits and the claiming strategies to determine the best time to start getting this money (only 29 percent of sixtysomethings told Transamerica they know a great deal about Social Security); understand what Medicare covers (and doesn’t) and whether you’ll need to buy Medigap coverage and consider meeting with a financial adviser.

“It’s important to do a reality check,” says Collinson, “because circumstances can derail the best of plans.”

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